Fund Set to Be a Catalyst for Growth; How Can Business Growth Be Financed While the Banks Are Still Showing Themselves to Be in a Mood to Avoid Risk? Lucas Markou, Partner at Solihull-Based Accountants and Business Advisers Jerroms LLP, Reports
Byline: Lucas Markou
For some businesses, the Government has provided a ray of hope in the shape of the new Business Growth Fund (BGF), which will have pounds 2.5 billion to invest in small and medium sized firms.
BGF is chaired by Sir Nigel Rudd, a corporate heavyweight, former deputy chairman of Barclays Bank and founder of a successful group of companies three decades ago.
The formation of BGF, which is currently making its first investments, is supported by the government and backed by major banks including Barclays, Lloyds and RBS. BGF will specialise in equity investment and the banks will obtain their returns as shareholders in BGF itself.
The idea is to build a kind of giant investment group providing fixed or equity capital, leaving the banks to focus on providing short term working capital or asset finance.
Private equity has been around for a long time but the firms that supply it have moved up the size league and in recent years, most have only invested large sums, meaning they had no relevance to smaller businesses. This made it even more difficult to raise long term capital of relatively modest amounts.
The combination of this factor and the reluctance of banks to provide unsecured lending has led to the formation of BGF, which aims to provide between pounds 2m and pounds 10m to established growing businesses across a broad spectrum apart from the financial services sector.
I welcome the BGF initiative because it addresses the need for fixed capital and because it is planning to take a long-term view. …